Bangladesh is facing its weakest investment climate in history, with the implementation of the Annual Development Programme (ADP) dropping to its lowest level in the past 10 years, the Centre for Policy Dialogue (CPD) said on Saturday.
Private investment has fallen to a historic low, foreign direct investment is at its weakest in recent years, and although food inflation has eased marginally, non-food inflation remains “unacceptably high,” CPD Executive Director Dr Fahmida Khatun said while presenting the organisation’s assessment of the economy.
She was delivering the keynote paper titled “Bangladesh Economy 2025–26: Multidimensional Risks at an Electoral Crossroads”at a CPD event held in the capital’s Dhanmondi area. CPD Distinguished Fellow Prof Mustafizur Rahman and Research Fellow Dr Khondaker Golam Moazzem were also present.
Sluggish Growth, Weak Investment
Dr Khatun said the overall pace of economic activity remains sluggish, with slow ADP implementation emerging as a major concern. “The ADP implementation rate is the lowest in a decade, reflecting serious weaknesses in public investment execution,” she said.
She identified declining investment as the most pressing challenge for the economy. “When investment falls, employment shrinks, unemployment rises and economic uncertainty deepens,” she said, adding that foreign investment has also slipped to a record low.
Despite these challenges, she noted that Bangladesh’s large and youthful population remains its greatest long-term strength.
Banking Reforms Must Continue
The CPD executive director stressed that banking sector reforms undertaken by the interim government must not be reversed or stalled after the election.
“Reform efforts should continue under the elected government. If necessary, weak banks should be merged or even closed. Restoring depositor confidence requires clear political commitment and strong regulatory action,” she said.
She emphasised the need to reduce political influence in the banking sector, enforce the bank resolution framework, amend the Bank Company Act and ensure the central bank’s independence to restore financial stability.
Revenue Shortfalls, Rising Inflation
Dr Khatun warned that persistent revenue shortfalls, high inflation, food security risks, a fragile banking system, energy shortages and external sector uncertainties have made a bold and coordinated reform programme unavoidable.
To boost revenue, she recommended identifying new sources, encouraging taxpayers, scrapping unnecessary tax exemptions, strengthening measures against illicit financial flows and overhauling the tax system in preparation for Bangladesh’s graduation from least developed country (LDC) status.
She also urged restraint in government borrowing from banks and called for stricter oversight of development project spending.
Food Prices Defy Global Trends
On inflation, Dr Khatun said food prices in Bangladesh remain high despite falling global prices, particularly for rice and wheat.
“Data show that domestic rice production exceeds demand, and international prices have declined, yet prices have not fallen locally,” she said, attributing the problem to supply chain inefficiencies, weak storage management and the influence of intermediaries.
She noted that traders earn the highest profits from items such as potatoes, onions, green chilies, eggplants, fish and meat, while rice trading yields comparatively lower margins.
“Inflation has become a structural problem. It cannot be controlled solely by raising interest rates,” she said, calling for reforms in food supply systems, improved storage and transport infrastructure, reliable data and timely import decisions. She urged the government to treat food security as an issue of national security.
Energy, Exports and Future Growth
Dr Khatun said sustainable growth would remain elusive without deep reforms in the energy sector, including greater focus on renewable energy, shutting down expensive power plants, expanding domestic energy exploration and ensuring financial transparency.
She also stressed the importance of export diversification, skilled human resource development and strategies to sustain remittance inflows.
“Bangladesh faces both significant risks and major opportunities. With political commitment, institutional reform and sound policy decisions, the economy can regain momentum and public confidence,” she said.
Call for Credible Elections
CPD also called for the upcoming national election to be transparent, inclusive and violence-free, with no excessive use of money.
Asked to assess the interim government’s economic performance over the past one and a half years, Dr Khatun said the outcome has been mixed.
“There have been meaningful reforms in several sectors, but a new group of poor people has also emerged. Without higher investment, employment will not grow, and economic recovery will remain fragile,” she said.